De Blasio Proposes Tax on Rich to Fix Crumbling NYC Subways

(Bloomberg) -- New York Mayor Bill de Blasio, a Democrat seeking re-election this year, proposed a tax on the wealthy to pay for repairs to the city's deteriorating subway system.

The plan would increase the city's highest income-tax rate to 4.41 percent from 3.88 percent on earnings above $500,000 for individuals and $1 million for couples. The move would affect about 32,000 people and raise as much as $800 million a year, de Blasio said Monday.

Most of the revenue would go toward fixing a mass-transit system that has been plagued in recent months by breakdowns and delays, contributing to the first decrease in ridership in more than 20 years. About $250 million would subsidize half-price fares for 800,000 New Yorkers living below the federal poverty line, said de Blasio, 56, whose re-election campaign has focused on making the city more affordable.

“Rather than sending the bill to working families and subway and bus riders already feeling the pressure of rising fares and bad service, we are asking the wealthiest in our city to chip in a little extra to help move our transit system into the 21st century,” de Blasio said.

The idea is sure to provoke more disagreement between the mayor and Governor Andrew Cuomo, who have been feuding since de Blasio took office in 2014. Cuomo, also a Democrat, has insisted the city pay half of an $830 million emergency-overhaul proposed last month by his chairman of the Metropolitan Transportation Authority, Joseph Lhota. The mayor has said the city already is giving its fair share.

Splitting Bills

While the city owns the subway system, the MTA runs it. Lhota's plan would add cars on trains to ease overcrowding, remove seats from some cars to increase capacity and step up maintenance.

Lhota rejected the mayor's tax-the-rich plan, saying that even in the unlikely event that the Republican-controlled state legislature approved it, the funding would come too late.

“The challenges the subways are facing today need immediate resources and solutions right now, not years from now,” Lhota said in a statement Monday.

Republican Senate Majority Leader John Flanagan also rejected de Blasio's proposal, saying the mayor “doesn't need to reach into the wallets of city residents.”

The mayor has failed previously to get state approval to increase taxes on the wealthy, including his 2014 proposal to fund universal all-day pre-kindergarten. Cuomo instead persuaded the legislature to fund the program statewide out of general revenue.

De Blasio's call to finance affordable housing for seniors with a “mansion tax” on transfers of city apartments above $2 million also failed.

Millionaires' Tax

This time, de Blasio said, his call to tax the rich will succeed because voters and lawmakers recognize New York's regional transit system is breaking down.

“The voices of millions of New Yorkers is what's going to make the difference here,” he said Monday during a news conference. “The 1 percent have been asked to pay less and less in terms of taxes. Change happens at the grassroots. More and more New Yorkers will say ‘I want the wealthy to pay more.'"

De Blasio has rejected the idea of raising revenue by establishing tolls on East River bridges connecting Manhattan with Brooklyn and Queens, or through congestion pricing, which would require Manhattan-bound drivers to pay a fee.

Lost Wages

He won support for his tax proposal from Manhattan Borough President Gale Brewer, who said it would provide a recurring revenue source for the subways; and John Raskin, executive director of The Riders Alliance, a transit advocacy group, who said fairness required the wealthiest residents to pay more.

“A millionaires' tax would require some New Yorkers to pay, but the status quo requires literally millions of New Yorkers to pay in the form of lost wages, missed work and days ruined by breakdowns and delays,” Raskin said. “It's fair to ask the New Yorkers who benefit the most from our city's prosperity to pay a little more to repair the infrastructure that the entire economy relies on.”

Kathryn Wylde, president of the Partnership for New York City, a group of corporate chief executives, said the mayor's plan would “throw the city's high earners under the bus.”

The group supported a state tax on millionaires when the 2008 recession created a fiscal crisis. The city, which has a budget surplus exceeding $4 billion, shouldn't demand more from its wealthiest residents, who are already paying large tax bills and have the option to flee, she said.

The mayor's proposal may backfire if it's seen as an election-year ploy to enhance his progressive image, said William Cunningham, a political adviser to former Governors Hugh Carey and Mario Cuomo and former Mayor Michael Bloomberg. (Bloomberg is founder and majority owner of Bloomberg News parent Bloomberg LP.)

“It has little to do with winning in Albany and more to do with a campaign ad in September and October championing transit riders,” Cunningham said. “The mayor thinks he outflanked the governor and will elude the need to have the city contribute. In fact, he may have blithely entered a trap set by the governor because the mayor is now on record that the city could pay extra.”

To contact the reporter on this story: Henry Goldman in New York at hgoldman@bloomberg.net.

To contact the editors responsible for this story: Michael Shepard at mshepard7@bloomberg.net, Stacie Sherman, Stephen Merelman